Defaulting banks - where will it stop?

[Linda Minor]

I am not surprised by this figure of $10 trillion. Black money from the drugs trade, arms trade and all other criminal activities has been filtering into offshore accounts for decades. That money is then put back to work in legitimate business enterprises.

The key to this was outlined by Michele Sindona when in prison and slightly before his death when he was interviewed by Nick Tosches for his book "Power On Earth".

Here's something I wrote about ten years ago, which I found on my computer:

In 1964 Sindona founded Euromarket Money Brokers (commonly known as Moneyrex) to deal in debt brokerage and in buying and selling of spot and future currencies. Sindona described what Moneyrex did as follows:

"We had ten Telex machines, twenty telephones. . . . Say Barclays Bank of California needed $100 million. We go to the Telex, the telephone. We call Banca Nazionale del Lavoro, Bank of Tokyo, Chase Manhattan. We quote a rate of interest that Barclays is willing to pay, say eleven and a quarter percent. They say OK, and they transfer $100 million automatically. To our account then is automatically credited one-eighth of one percent of $100 million, or maybe one-sixteenth, one thirty-second of one percent, depending on the fickleness of the market. We never took risks, there was no speculation with Moneyrex--just commissions, brokerage fees."1

Since as early as 1959 when Sindona started Banca Privata, he had been acquainted with David M. Kennedy, the president and chairman of the Board of Continental Illinois Bank. Kennedy, a Mormon from Utah, who worked for the Federal Reserve in Washington, D.C. for 16 years before going to Chicago, became Secretary of the Treasury during the Nixon administration.2 The two men in 1968 attempted to found an Italian investment bank that would "rival the great British banks in the field of international commerce." 3 The other partners in the venture were Hambros Bank and Lehman Brothers of New York, an investment banking partnership which later became Shearson, Lehman. The attempt failed, Sindona claimed, because of sabotage by Enrico Cuccia, director of Mediobanca, the largest investment bank in Italy. Sindona believed Cuccia spread rumors to the press that Sindona was operating on behalf of the Mafia.

According to Penny Lernoux, Sindona did have origins "in Sicily, which took over from Marseilles as the world's heroin center when the French Connection was broken in the early 1970s."4 Chuck Giancana, brother of Chicago mobster Sam Giancana, stated in his book Double-Cross, that "millions of dollars flowed to Continental Illinois, a bank then heavily invested in Finibank, a Swiss bank owned in part by the Vatican and controlled by financier Michele Sindona."5 Other money was couriered by Catholic priests to Mexico and placed in Central American banks, most commonly in Panama, from which the funds were diverted to Milan and then to the Vatican Bank in Rome, from which they could be transferred to banks and companies controlled by Sindona. Sindona was associated with Paul Marcinkus, secretary of the Vatican bank, who as a Chicago priest, had been used in the 1940's and early 50's by Sam Giancana as a courier to funnel money from the diocese to the Vatican, and who later was accused of international money laundering and involvement in the murder of Pope John Paul I. Chuck Giancana also reported that his brother had assisted the CIA in laundering its money through the same channels, in exchange for contributions to Catholic charities.

In January 1969 an allegation appeared in Le Figaro of Paris claiming that through Sindona, "the Bank of America had come to serve 'Frank Sinatra and the powerful financial interests of certain Siciliens d'Amerique who seemed to gather around the singer.'"6 In August 1973, after Sindona purchased Loews' stock in Franklin National Bank in New York, an article by Dan Cordtz appeared in Fortune stating that there was no documentary basis for the rumors connecting Sindona to the Mafia. Nevertheless, in 1973, Sindona approached Bank of America, which:

had been founded by Amodeo Gianini, an Italian immigrant to San Francisco. Now, at the suggestion of the head of the Bank of America's Italian subsidiary, Banca d'America e d'Italia, Sindona proposed to Giannini's daughter, Claire, that the Bank of America refresh its Italian roots. This refreshment, of course, should take the form of Michele Sindona's acquisition of 10, perhaps 15, percent of the bank's stock. The founder's daughter responded to the notion with charmed approval, and Sindona undertook a formal presentation to the bank's administration, headed by Tom Clausen. While Sindona's talks with Clausen progressed, David Kennedy informally approached the Federal Reserve on Sindona's behalf. He reported to Sindona that no one in Washington would deny his Bank of America plans as long as he simultaneously sold his interest in Franklin.7

Franklin Bank was declared insolvent on October 8, 1974. In July 1978 the FDIC, as Receiver for the bank, filed suit against Lawrence Tisch, Loews Corporation and Lawton General Corp., a subsidiary, claiming:
(1) that Mr. Tisch misused his position as a director of FNB and its parent, Franklin New York Corporation (FNYC) and "inside information" to obtain a premium for defendants, the Company and Lawton, on the sale of 1,000,000 shares of FNYC common stock to Fasco International Holding, S.A. (Fasco), a company then controlled by Michele Sindona;
(2) that Mr. Tisch misused his position as a director of FNB and FNYC to "facilitate" various steps whereby Sindona and his associates were placed in positions of management control of FNB and, particularly, its international business, as a result of which Sindona caused FNB to suffer substantial damages; and
(3) that Mr. Tisch and the defendant corporations owed a fiduciary duty to FNYC and FNB which was breached by alleged failure to make proper investigation of Sindona.8

In 1980 Sindona was sentenced to 25 years in a U.S. federal prison for fraud, misappropriation of funds and perjury in connection with the draining of funds from Franklin National Bank.9 In 1982 he was indicted with 75 Italian Mafiosi in a heroin conspiracy and was extradited to Italy in 1986 for trial on charges of ordering the murder of the Italian judge involved in liquidating Sindona's assets. He died in jail of cyanide poisoning four days after his conviction. Before he died he was interviewed by Nick Tosces for the book mentioned above, which sets out Sindona's descriptions of various means of laundering money and of the potential for destroying a country's monetary system. The following is an intriguing section of the book:

. . .[T]he central bank of Hungary, acting on behalf of the Soviet government, placed an order through Moneyrex to sell [the grain contracts] short $20 billion. Sindona realized that Moscow, having closely followed the decline and instability of the dollar since the Smithsonian Agreement of August 1971, was betting that a greater, sudden decline was imminent--a decline that could be abetted by the massive short-sale order it was now placing. If Moscow succeeded, it should realize both a purely speculative profit and an indirect profit on the grain contracts, which had been stipulated in terms of more valuable dollars. . . . Sindona's reports of the Soviet plot were not acted upon by Nixon's economic advisors. In fact, as if orchestrated by the Kremlin itself, Secretary of the Treasury John Connally devalued the dollar by 10 percent on February 12.10
Thus in a few weeks' time, the Soviet Union realized a $4 billion profit: $2 billion in the selling short of the $20 billion (which had been bought largely by the Bundesbank) and $2 billion in the 10-percent devaluation of their grain-deal dollars. * * *
It was also in late 1972 that Moneyrex had been approached by representatives of an international consortium looking to sell short in the equivalent of $6 billion in lire. At the time, the lira was veering toward a fall under strong speculative pressures; and Sindona saw that the proposed short sale would likely have catastrophic results.
"They did not so much want to make money," he recalled. "They wanted to destroy the lira. They told me that there was $300 million in it for me.
After giving the matter some thought, Sindona decided to call his friend Prime Minister Andreotti and to explain the situation. He told Andreotti that there was a way for the hunter to be captured by the game, and Andreotti told him to go forward as he saw fit.
"I did not accept the consortium's order, and it was given to others. At the same time, I contacted a number of foreign banks and told them in confidence that the prime minister had authorized me to seek temporary support for the lira. Many of them agreed to cover the short sale. After about 400 billion lire had been sold short, the consortium abandoned its venture. The lira was being defended too strongly."
Later in June 1973, Prime Minister Andreotti--who once had privately commented to Sindona, "I can't even draw a drink of water without first asking the communists"--resigned from office. Two days later, the lira plummeted.
In discussing the plot to destroy the lira, Sindona seemed reluctant to reveal the identity of the consortium. "It sounds bad," he told me, waving his hand. "I already have enough enemies." Finally, he waved his hand in the opposite direction. "They were Jews," he said. "The people who handled the money and did the talking were from Geneva, but the money was from Israel." He shrugged, then he looked away. "Many strange things I learned, many very strange things."11

1 Ibid., p. 72.
2 Nick Tosches, Power on Earth: Michele Sindona's Explosive Story, 1986.
3 Tosces, p. 104.
4 Penny Lernoux, In Banks We Trust.
5 Sam and Chuck Giancana, Double-Cross: The Explosive, Inside Story of the Mobster Who Controlled America, Warner Books, 1992.
6 Tosces, p. 107.
7 Tosces, p. 145.
8 SEC 10-K filing for Loews Corporation, 1978.
9 David E. Scheim, Contract on America: The Mafia Murder of President John F. Kennedy, 1988.
10 Incidentally, in The Case Against the Vatican, the author reports that there was evidence from _____ indicating that John Connally had been paid off by ______, who was involved in schemes with Sindona. Incidentally, John Connally's Houston office was in Walter Mischer's building at 2727 North Loop East. Pete Brewton has also connected Connally in a business deal with Jim Bath, who was acting as trustee for Sheikh Kalid bin Mahfouz, and another Saudi, Gaith Pharoan, who was indicted in the BCCI scandal [p. 222]. In 1976 they bought into Main Bank of Houston, formerly owned by Bob Lanier. Connally sold his investment in 1980, and in 1981 Capital Bank's holding company, Mercantile Texas Corporation (later MCorp) bought Main Bank from Sheikh Khalid. Main Bank was situated on Block 271 in downtown Houston, just across Travis Street from the Houston Natural Gas Building.
11 Tosces, pp. 139-140.